Here are some sample widgets you could interact with from this dashboard:
Morgan Stanley's 3 divisions are expected to make $41.84 billion for full-year 2020
(1) Institutional Securities $19.9 billion (48%),
(2) Wealth Management $18 billion (43%), and
(3) Investment Management $3.9 billion (9%)
Morgan Stanley’s Institutional Securities segment, which consists of 5 businesses- equity trading, FICC (Fixed income, currency, and commodity) trading, equity underwriting & debt origination, M&A advisory, and principal investments & other, is expected to contribute $19.9 billion to Morgan Stanley’s 2020 revenues, making up 48% of the company's $41.8 billion in revenues for 2020.It is the highest contributing segment of the bank with around 49% of revenue share over the last 3 years. The bank would likely add around $1.6 billion over 2020-2021 in incremental revenues, out of which around $785 million would be from Institutional Securities.Although wealth management’s contribution to total revenues has averaged around 43% over 2017-2019, it is expected to add $573 million over the next two years. The segment provides financial services (like brokerage, investment advisory, financial planning, insurance, securities-based loans, etc.) to wealthy individuals as well as small- to medium-sized businesses and institutions.Below we discuss Morgan Stanley’s business model, followed by sections that review past performance and 2020 expectations for the company’s revenue drivers, and competitive comparisons with Bank of America, JPMorgan and Goldman Sachs.
Morgan Stanley's Business Model
Has 3 Operating Segments-
Institutional Securities: It consists of five sub-divisions:Equity Trading – makes market in and trades equities and equity-related products, structures & derivativesFICC Trading – makes markets in and trades interest rate products, mortgage-related securities, loan products, currencies, commodities etc.Equity Underwriting & Debt Origination – offers equity & debt underwriting services, which includes public offerings and private placements.M&A Advisory – provides advisory services in Mergers & Acquisitions (M&A) and financial restructuringPrincipal Investments & Other – includes returns and overrides on corporate & real estate investments made by bank-managed merchant banking funds
Wealth Management: It provides financial services (like brokerage, investment advisory, financial planning, insurance, securities-based loans etc.) to wealthy individuals as well as small- to medium-sized businesses and institutions.
Investment Management: This division provides retail investors with a full range of mutual fund and alternative investment products, and institutional clients with a fully-integrated asset management offering.
What Need Does It Serve?
Morgan Stanley provides investment banking, sales & trading, investment management and wealth management services to its clients.
Its end users include:Corporates GovernmentsInstitutional Investors such as pension funds, mutual funds and hedge funds High Net-worth Individuals
What Are The Alternatives?
Morgan Stanley's business model faces stiff challenges and competition from offerings by its global competitors such as:JPMorganGoldman SachsWells FargoCitigroupBank of America
Although Morgan Stanley's revenues have increased at an average annual rate of 6% over the last three years -- from $37.9 billion in 2017 to $41.4 billion in 2019, we expect the growth rate to reduce to 2% over 2020-2021.
YOY change in Total Revenues
The segment revenues have grown 8% over the last two years – from $18.5 billion in 2017 to $19.9 billion in 2019.This includes an addition of $618 million to FICC (Fixed income, currency & commodity) trading revenues over 2017-2019, driven by a 36% jump in FICC trading assets. Further, Principal Investments & Other revenues grew 6x over the last two years – an increase of $507 million, mainly driven by mark-to-market net gains on holdings of publicly traded investments.M&A revenues suffered a reduction of 13% – from $2.4 billion in 2018 to $2.1 billion in 2019, due to negative economic conditions. However, the expected easing of ongoing tensions between the U.S and China as an effect of the U.S-China trade deal (phase one signed on 15th January), would support the revenues to grow 11% over 2020-2021.Although equity and debt underwriting revenues have suffered in 2019, we expect the unit to grow by 6% and cross $3.8 billion by 2021.FICC trading revenues grew 11% y-o-y in 2019, thanks to the significant jump in the last quarter of the year. Moving forward, we expect the improvement in bond trading yields to drive growth and enable the division to cross $5.8 billion by 2021.While equities trading revenues dropped 10% y-o-y in 2019, mainly driven by 143 bps decrease in equities trading yield, we expect the segment to grow 6% over the next two years primarily due to a 7% increase in equity trading assets.Overall, we expect the segment revenues to increase by 4% and cross $20.7 billion by 2021 – an increase of $785 million.
Wealth management has grown at an average annual rate of 5% over the last 2 years from $16.8 billion in 2017 to $17.7 billion in 2019 and is expected to add $573 million in incremental revenues over the next two years.Although Net Interest Income from Wealth Management loans has grown 3% from $4.1 billion in 2017 to $4.2 billion in 2019, the revenues slightly decreased in 2019 on a year-on-year basis, driven by 46 bps decline in the segment's net interest margin.Moving forward, we expect the net interest income to grow 10% to $4.6 billion over the next two years, primarily due to growth in wealth management loans.This segment generates the majority of its income from advisory and management fees - more than 75% over the last three years.The fees income had added $784 million over the last 2 years, mainly driven by a 14% growth in total client balances, led by wealth management Assets under Management. However, we expect the fee income to add only $165 million in incremental revenues over 2020-2021.This would be driven by a decline in Fees as % of Total Client Balances, which would offset the positive impact of slight growth in total client balance to a great extent.Overall, the segment revenues are expected to cross $18.3 billion by 2021.
Our complete set of analyses on Morgan Stanley